During A Recession, Will My Money Be Safe in The Bank?
An individual keeps money in the bank as it is the safest place than keeping cash at home or in office lockers.
In a recession, money is something that gets impacted. It is why people tremble. This fear among individuals makes them run to the bank for good.
When too many individuals try to withdraw their money from the same bank, it runs out of business. It shares no authority over people’s decisions and hence suffers the loss.
In this case, individuals face hard qualifying debt consolidation loans for bad credit UK no guarantor. One of the reasons can be the hard credit check in the UK with no guarantor.
However, it happens in extreme situations.
So, Should I take money out of the bank in 2022?
Advanced technology bridged the gap between banking institutions and individuals. It means that even in situations like recession, your money is safer in banks than in your home or office.
How Does Your Money Gets Impacted During a Recession?
Slowing GDP for consistently two quarters is the cause of the recession. GDP, or Gross Domestic Product, measures the country’s economic performance. It includes different measures like – income, expenditure, government spending, and exports.
It impacts your money in different ways:
1) Job losses
In the 2020 recession in the UK, a good percentage of individuals got unemployed. The following year, employment decreased by 220,000. It was the largest financial crash in UK history. The sudden job losses were the primary cause of concern for the country’s people.
2) Decreased availability of unsecured loans
With lenders tightening up the lending criteria and interest rates high, the lenders were not of any help. The availability of unsecured loans without a guarantor decreased consecutively for 3 months. 0% interest deals and mortgage deals took a back seat.
3) Disturbing interest rates
The base rate is the rate at which the Bank of England lends funds to the bank. If the base rate is low, lenders may provide sums to the borrower at an affordable rate and vice versa. While this might impact your savings but spending becomes easier.
Thus, a recession is never good for any economy. It turns savings, investments, and financial goals upside down.
Is Your Money Safe in the Bank?
The government took some initiatives to safeguard individuals’ money and protect their savings from collapsing. Government launches some relief schemes like:
- Furlough scheme for workers
- Self-employed income support scheme by the government
- Payment holidays on mortgages cover the scheme
- Stamp Duty
- Other forms of borrowing
However, FSCS plays an important role in safeguarding financial securities.
What is FSCS (Financial Service Compensation Scheme)?
Post-2008 recession, FSCS (Financial Service Compensation Scheme) protects your money up to £85,000. It implies that in case the bank collapse, you can recover money only up to this amount.
There is a measure to protect” Temporary high balances”. It is something that you may gain from a house sale or inheritance. If you encounter loss on these, you do not need to worry. One can recover up to £ 1 million. FSCS safeguards it.
Who May Qualify For FSCS?
Not everyone can apply for FSCS. There are specific rules and criteria that an individual must meet. FCA (Financial Conduct Authority) and Prudential Regulation Authority ( PRA) define these rules. Here are the requirements to qualify for FSCS:
- If the financial firm is bankrupt and is not in a position to pay off your money
- FCA and PRA must authorize the firm.
- You must reveal the proof of losing the money. An authentic proof may help you in this case.
- Claiming the personal money
What all does FSCS cover?
FSCS is a responsible authority that covers particular financial products. Here are the services and compensation covered under this:
- Banks and building societies: £85000 per individual
- Debt management: £85000 per individual, £50000 for businesses
- General insurance cover: It covers 90-100%, according to circumstances
- Life and pension intermediation: £85000 and £50000 for businesses
- Investments: £85000 per individual and £50000 for businesses
- Payment Protection Insurance: 90% claim (if the firm collapse after 2010)
If You have more than £85000 in 2 banks owned by the same authority, you can qualify for only a single account having (£85000) for a claim. To avoid losing money, save money in different accounts.
A recession is the worst scenario to face. In this, act immediately and check whether or not you qualify with FSCS. It can be of relief in undirected and unexpected circumstances.